Part 2: MSO Opportunities and Challenges
Tomorrow’s Cable Operator: Goodbye Entertainment?
How will cable operators compete three years from now? What new services will they offer, and what kind of new partnerships and ecosystems will they need to be invested in? In the second of this four part blog series, GlobalData’s Emma Mohr-McClune considers some likely scenarios.
Long before a little thing called The Internet came along, cable operators were video pioneers. For the best part of the last 40 years most households considered ‘cable’ and ‘TV’ as a single-phrase descriptor for a premium home entertainment experience.
Roll forward to 2020, and those pioneers are facing new existential challenges: The entire advertising-based cable TV business model is being challenged by OTT subscription-based video services. New content procurement – once considered a cable TV provider’s core competency – is being undermined by media brand ambitions to go D2C, and the available household spend budget for premium entertainment is now being tapped for new digital household requirements – more smart devices, different online services, and experiences.
For cable operators, it’s time to take stock, consider the requirements of tomorrow’s consumer, and with it, the shape of tomorrow’s bundle. One of the conclusions that many are now drawing is that content variety and choice – the former Unique Selling Proposition (USP) of the classic cable TV bundle, is no longer the sole guarantee of higher-spend loyalty.
As discussed in the previous blog of this series, the COVID-19 crisis is teaching consumers to place a higher value on strong, reliable broadband. There’s a now-universal acceptance of the notion that the crisis will speed the adoption of home learning, home working and online medical consultation. Cable TV operators may soon need to start devising service and portfolio strategies that can take all that into account.
As the home working trend ramps up, more customers, traditionally viewed as coming from the consumer segment, may start looking for more business-like SLA guarantees for their connectivity. They may also want to start expensing their home broadband services to their employer. It might even make more sense to have employers take ownership of these residential accounts, as well as the security and VPN services required to give real meaning to home or remote working.
Once enterprises start footing the bill for consumer products, the next big movie blockbuster or series exclusive will likely become less important as a mass market cable TV differentiator, although possibly still valuable as an employee loyalty or retention trigger. Service providers may have to learn to think about their residential customers as consumers only part of the time.
We’re already seeing the first signs of those changes in home online behavior. In the US, Comcast – one of the leaders in the customer experience, with AI voice command features for a host of TV and smart home experiences – recently noted an increase in the usage of home network management features such as parental controls (up 27% since the start of the crisis) and Wi-Fi network pausing during lunch-time periods (up 57%). The Vodafone Group, which redeployed 100,000 of its own staffers to work at home during the crisis, noted an increase in working hours among home workers, reflected as a spike in conference calls occurring after 5pm. Without the time-drain of commuting to and from the office, global colleagues working on global projects may start demonstrating more work- time flexibility – potentially a boost for global business productivity, if managed right.
Lastly, it is likely consumers living and working more at home will start expressing more interest in digital cybersecurity products for the home that go beyond malware protection.
Like parental controls, most service providers have offered malware security products for some time. But a handful of providers, including some of the more innovative cable operators such as Comcast, Cox, Deutsche Telekom, A1 and Liberty Global, have gone further with security products for home IoT devices, as well as other types of online security products for consumers: Banking and online credit card fraud, personal reputation or cyberbullying insurance and other, broader types of cybersecurity for the home.
As more workers, college and university students start interacting with their colleagues and peers online from home via corporate and academic VPN access and cloud platform services of all descriptions, broadband providers may need to revise the traditional bundle structure of triple or quad-play to take account of new VAS requirements.
Of course, it starts with platform integration and partner ecosystem management, and some providers are already some way down that path.
Last December, before the onset of the crisis in the US, DISH announced a range of new smart home features for its Hopper and Wally receivers, notably including support for the Google Next Hello Video doorbell which sends on-screen notifications direct to the user’s TV when the doorbell is rung – a first for the pay-TV provider world. At around the same time, Cox Communications announced a project with the Arizona State University’s students, staff, and faculty to design IoT solutions such as optimizing buildings for sustainability, and providing learning experiences in virtual & augmented reality. In South Korea, SK Broadband has been extending the definition of premium content beyond video entertainment for some time. The company has already talked up the fact that its IPTV home physical training service and its home-schooling channels for infants, as well as its Cloud PC service, which essentially allows a user to maintain a virtual desktop interface accessible from anywhere – have all come into their own during the lockdown crisis.
All of these cloud projects are likely to receive new product development urgency, as the ‘new normal’ starts coming into focus. The Cable TV provider is well positioned to evolve its business model to make good on these opportunities, and many are already doing so, expanding their USP beyond content and entertainment to many other new forms of digital experiences.
On the network side, this change of focus will require – among other things – a thorough re-thinking of the transport network underpinning more versatile, scalable, and intelligent access networks. In the next blog in this series, GlobalData’s Emir Halilovic will discuss some of the network implications of this transformation.